Correlation Between Yunnan Yuntianhua and Jinsanjiang (Zhaoqing)

Can any of the company-specific risk be diversified away by investing in both Yunnan Yuntianhua and Jinsanjiang (Zhaoqing) at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Yunnan Yuntianhua and Jinsanjiang (Zhaoqing) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yunnan Yuntianhua Co and Jinsanjiang Silicon Material, you can compare the effects of market volatilities on Yunnan Yuntianhua and Jinsanjiang (Zhaoqing) and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Yunnan Yuntianhua with a short position of Jinsanjiang (Zhaoqing). Check out your portfolio center. Please also check ongoing floating volatility patterns of Yunnan Yuntianhua and Jinsanjiang (Zhaoqing).

Diversification Opportunities for Yunnan Yuntianhua and Jinsanjiang (Zhaoqing)

0.56

Correlation Coefficient

Yunnan Yuntianhua  Jinsanjiang (Zhaoqing)

Very weak diversification

The 3 months correlation between Yunnan and Jinsanjiang is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Yuntianhua Co and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang (Zhaoqing) and Yunnan Yuntianhua is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Yunnan Yuntianhua Co are associated (or correlated) with Jinsanjiang (Zhaoqing). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang (Zhaoqing) has no effect on the direction of Yunnan Yuntianhua i.e., Yunnan Yuntianhua and Jinsanjiang (Zhaoqing) go up and down completely randomly.

Pair Corralation between Yunnan Yuntianhua and Jinsanjiang (Zhaoqing)

Assuming the 90 days trading horizon Yunnan Yuntianhua Co is expected to generate 0.51 times more return on investment than Jinsanjiang (Zhaoqing). However, Yunnan Yuntianhua Co is 1.96 times less risky than Jinsanjiang (Zhaoqing). It trades about 0.03 of its potential returns per unit of risk. Jinsanjiang Silicon Material is currently generating about -0.02 per unit of risk. If you would invest  2,283  in Yunnan Yuntianhua Co on December 28, 2024 and sell it today you would earn a total of  41.00  from holding Yunnan Yuntianhua Co or generate 1.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Yunnan Yuntianhua Co  vs.  Jinsanjiang Silicon Material

Yunnan Yuntianhua

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Yuntianhua Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yunnan Yuntianhua is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jinsanjiang (Zhaoqing)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinsanjiang Silicon Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jinsanjiang (Zhaoqing) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yunnan Yuntianhua and Jinsanjiang (Zhaoqing)

The main advantage of trading using opposite Yunnan Yuntianhua and Jinsanjiang (Zhaoqing) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yunnan Yuntianhua position performs unexpectedly, Jinsanjiang (Zhaoqing) can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Jinsanjiang (Zhaoqing) will offset losses from the drop in Jinsanjiang (Zhaoqing)'s long position.

The idea behind Yunnan Yuntianhua Co and Jinsanjiang Silicon Material pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.